There has never been a better time for Australians to think about the sort of wine industry it wants to have in the future. Still battered and bleeding from its recent history of confusing turnover and volume for profitability, it needs to consider the sort of fiscal environment in which it wants to operate. And that means tax.Australian wine has inherited an ad valorum taxation system in which it is taxed at wholesale with a 10% GST, before the application directly thereafter of a 29% WET, the infamous ‘wine equalisation tax’.
These numbers were arrived at to guarantee to the Federal Government a return from Australian wine no less than the pre-GST environment that involved the application of a sales tax (first introduced in 1983 at 10%) plus the various State-derived ‘licence fees’. The result is a system that means the more you increase the price of your wine, the more tax it generates. Broadly speaking then, the customer is being pinged more for buying better wine. If company tax is included, a bottle of wine that retails for $25 generates a taxation take by the Federal Government of around $6.25, a quarter of the actual retail price. Bottled wine at this price is taxed at roughly ten times the rate of 4-5 litre cask wine, much of which is sold for less per litre than bottled water.
How socially responsible is this?
There is increasing unrest within Australian wine to move towards a volume-based tax rate for wine, which would remove what many see as a disparity that has helped mis-shape the industry. If all wine were to be taxed around $1.40 per litre, a rate that with the GST is believed by many to maintain the Government’s level of income, it stands to reason that the price of bottled Australian wine would reduce in this market, while wine sold in larger containers would become more expensive. This might be the sort of compromise that wins the wine industry friends in Canberra, especially within the Department of Health.A volumetric tax would reduce the burden on smaller wineries, making them more profitable. This would directly benefit tourism and rural infrastructure. It would encourage Australians to make better Ð and not more Ð wine. It could help shape the future of a better wine industry that is more able to compete on the world stage.
Perhaps it’s worth considering!
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